I'm not talking about ISAs and those sorts of things, because an increasing number of people need to consider whether they should be paying tax on interest from their savings accounts.

Plummeting savings rates may tip some savers back below their annual tax free threshold, experts have said.

The interest rates on savings accounts have fallen dramatically over the past year with some accounts paying as little as 0.1%. This means that some low earners won't have to pay tax on their savings interest if they now fall below the annual tax-free threshold.

So what does it mean for you?

There are plenty of savers in the UK, particularly the elderly, who rely on the interest from their savings to top up their modest pension incomes.

But interest rates have fallen sharply over the last 18 months and will have undoubtedly caused financial hardship to those who depend on their savings income, sometimes just to make ends meet.

"Not only have these record low rates made ISA benefits barely worthwhile, and almost impossible to find a savings account that keeps pace with inflation, but it could also have an impact on the tax status of savings interest for some people," Andrew Hagger of Moneynet.co.uk says. "Because the rate cuts have been so drastic, it could mean that the total annual income for some consumers has now fallen below the tax free threshold which could entitle them to receive their interest income without tax deducted."

Let's take the example of a single pensioner aged over 75 who has an annual tax free allowance of £9,640. The state pension of £95.25 a week would result in an income of £4,953 while an occupational pension of £85 a month would add an extra £1,020.

When rates were higher, if the person had £60,000 in a savings account paying 7% they would earn £4,200 in interest a year. The total income would be £10,173. Therefore the annual income exceeds the tax-free threshold and the £4,200 interest would be taxed at 20% which amounts to £840 and means the net interest income from savings is reduced to £3,360.

However if you look at the same scenario with a much lower savings interest rate of 3.5% the savings interest would be reduced to £2,100 and the total income reduced to £8,073 which is below the tax-free threshold so the savings interest would be paid gross.

"his situation will not apply to everybody, but for those who are not sure if they are impacted, then it's worth looking at the HMRC help sheet which helps you work out step by step to see if you are eligible. Many people may not be aware of this situation, so if you have elderly friends or relatives on a low income, it's worth helping them to check this out as it could possibly save them a few hundred pounds per year.

If you find that you qualify for interest being paid without deduction of tax, you'll need to complete a form R85 and hand it in to your savings provider so that they can implement the change on your accounts.